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Customer means corporate accounts. Each corporate can have hundreds or thousands of employees so your KPI need adjusting just a touch
Captain jumps ship with GRC software and service assets, acquired by private entity.
OH lost one major customer, more to follow?
No CEO in place.
Smelly, Smelly, Smelly.
Who is to say £150M will be returned to shareholders in cash?
Are share buy backs not an option?
"Our services are delivered, often through multi-year contracts, by some 900 occupational health clinicians to over 3,000 customers."
It is not hard to see that this means there are about 3 and a third customers per clinician. Are these clinicians full time amployed? Is this efficiency of human resource? Can anybody please explain above.
The institutions will presently be buying shares to eliminate their short positions. Who are going to be the buyers once the positions are closed?
Continuing small bolt ons in TIC likely I would suggest given the £60m ish war chest. Although I agree a period of organic growth, clean financials and cash generation would probably help with the rating, accretive bolt ons should generate value long term. I think there is quite a bit of margin upside on the TIC side also - which they also call out in HY results. Operating margins should be comfortably double digit in that business and were only 9% in H1.
PTSG did 20%+ EBIT margins, and ultimately was bought for c.16x EBITDA back in 2019. Different market now though!
Having said that I do think there is a more than reasonable chance the TIC and OH bits get sold now that Dacre is moving on. Possible there is fire where there is smoke re the earlier rumoured c.£300m TIC disposal...
Great summary. Not sure how much of an impact the OH contract loss was but think it’s a dent
This just need a few good quarters to get confidence back in these two core businesses but I’d be happy to see them sold for the values below
Annoyingly my first tranche of shares was 750p(ish - and I’ve averaged down now). But valuations I don’t think will come back for a while
Was in London today with a PE fund. They were not very positive on Marlowes M&A team so I’m hoping it’s organic growth for the short / medium term
Felt compelled to post (first time!) as quite a few different figures flying around for the remaining biz, including from their house broker. My take below. All figures are co adjusted and public:
1) The sold biz did £31.4m EBITDA in FY23 as per the RNS. As others have pointed out this means the £430m consideration is c.13.7x trailing multiple, and lower on current year numbers - it probably did £16-17m most recent HY, and a recent £20m bolt on IMSM, so FY24 probably £34-35m. An OK price in these markets, but not knock out. Note the £31.4m was 38% of FY23 Group EBITDA (£82.7m) which tallies with the c.40% that the RNS states.
2) This means the remaining OH biz did £20.1m EBITDA in FY23, because the total GRC division did £51.5m (ie 51.5-31.4). Commentary in the HY results suggest some margin pressure in H1, but they grew single digits organically, noted a strong pipeline and expect margins to increase through 'significant' synergies going forward. Seems a business in decent health, excuse the pun. For more info on it, there is a pres on their website from 2022 when they acquired Optima Health (£11m EBITDA for £135m). Total OH EBITDA for Marlowe at this point expected to be £19m post synergies. They subsequently acquired TP Health for c.£15m for £1m pre-tax profit. So the £19m + £1m triangulates well with the £20m EBITDA I think OH did last year, although it seems they are behind in terms of getting further synergies from integrating the various bits.
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3) Which leaves the TIC business, which did £36.8m EBITDA last year, £19.3m in the most recent HY, and they are growing organically (6% pa) and completed 4 bolt ons , which suggests H2 will be better than H1, ie for this year TIC probably does about £40m EBITDA.
4) Central costs running at £6.5-£7.0m pa assuming no cost out post divestment. Means Group EBITDA this year at least £53m. Although CEO is moving across and business 30-40% smaller so there should be cost out here.
5) House broker (Cavendish) up until recently had forecast of £92.5m EBITDA for this year. If you ex out a rough £35m for the sold biz you get £57.5m EBITDA for this year. I wonder if this has been trimmed a little, but this suggests my £53m is conservative mainly due to growth / M&A / margin improvement to come in H2. I think £55m for this year (y/e March( is about right. Cav had £97m for next year (FY25) which we are almost in, and I'd suggest this is a better basis for valuation; ex the sold business I think this would be roughly £57-60m for TIC & OH.
Putting it together I agree £700-750m total value is well underpinned by the remaining businesses and the cash on the balance sheet post deal. Cash c.£205m, OH at 10x is £200m+, TIC at 8x is £320m+ = £725m+. I'm long obviously, and considering adding as I think 40-50% upside should be realised in short term once market cottons on, or if previo
Morning, the 16.2 multiple is cash ebitda, which falls to 13.7x on an accounting basis (which is comparable to the numbers Marlowe publish). Working that back explains the difference you reference.
Thanks for the £710m EV - yes broadly looks about right to me, too.
Will be interesting to see if the other shorts close now. Presumably their investment case has gone ie there’s no fundraise risk now?
Tbh over the weekend I thought about this deal and tbh it stinks. I think we’ve been desperate sellers and Alex has stolen some jewels for a song. Ideagen bought for £1bln I’d have liked to have seen a bit more for this division
The 16.2x implied multiple means a £26m EBITDA. Last year this division did £50m so I’m keen to understand the bridge. As far as I can see £8m capex deducted means OH must be £18m EBITDA. That feels about right?
If you backward solve it the other way it also seems to work. Obviously OH lost a large contract recently so maybe £15m EBITDA is now the run-rate
£150m divi + £60m cash + £150m OH + £350m TIC gives £710m EV which should be mcap given no debt. Any discount now is presumably the markets concern around TIC (quality of earning due to large integration costs) and the OH business (as it lost a large customer)
A good update and this should recover the discount. Even better is everything is sold
Today's rise is not to do with yesterday's big news,but rather shorts having to buy back many shares as they were caught out by yesterday's announcements
Agree. Alex was the key driver of the strategic vision and growth and with him gone, a new CEO (basically a corporate manager) would have no skin in the game and would be focussed on running for cash, dividends etc. As a stock, I think this has now gone ex-growth (no new platforms, cross sell between OH and TIC being fairly low, like you say), so the multiple will be lower? We still have a 5% CEO stock overhang, at some point, too?
I think they should get both businesses running sweetly, with all integrating finished, and then look to sell. Certainly I will be holding to see how this plays out in the coming months.
Blackrock got stung it seems. Increased on 20th and 21st! They have now unwound their short (or below the threshold). The issue for the short is 1) not much liquidity in the stock and 2) they will have to have cash on hand to pay the divi!
Still more shorts to close and hopefully they do. No reason why this business can’t be double the size as a standalone TICC business. Let’s get OH sold to a PE firm. The two don’t fit together
That’s how I see it!
Mcap is c.£500m of which £150m is cash. There should be about £60m of cash which is (cash the business already had, £30m and what’s left from the £405m after divi and debt paid). So of £500m you’ve £210m of cash!
That leave the remaining businesses which shouod push out £50m of EBITDA and £40m of FCF valued at £290m. That’s clearly not right
OH businesses trade at 10x multiples so if you carve that out the TICC element is pretty much valued at £150m! Given what Inflexion paid for Phenna group that’s clearly not right
Shame Inflexion didn’t buy the lot
£1.54 a share dividend I worked out?
Hope that’s correct.
£150 mill divided by 96.775 million shares .
With £150 million set aside for share holders.
This would seem a great entry price .
Clearly a lot of profit taking here to be expected for those that need to release funds.
Sorry my numbers were wrong. TICC EBITDA is c.£40m so it’s c.£32m of FCF
£40m on a poor 8x EBITDA multiple is £320m. £75m of cash and £150m for OH. £545m
I think this shows shares are undervalued here especially as that FCF builds and builds
The broker, which has a ‘buy’ rating and 720p price target for Marlowe, sees a strong argument for a higher valuation ‘given that the group’s balance sheet has been de-risked, capital can now be reinvested in growth, and the group’s future equity story is significantly cleaner than it has been of late. This is our view, although we expect this may take time to pan out, as the company’s future strategy is made clear.’
Solid buy. No debt payments any more.
£150 million coming back to us..
Plus £75m (ish) from paying down the debt and the £150m divi
Let’s get TICC sold for £300m now!
Adj. EBITDA is £35m. We know capex of TICC is c.£10m so FCF is now £20m per annum. They probs have a bit more to spend re integration but this will pass
Assume no growth that’s a £20m FCF so it’s reasonable to say it’s worth £200m or more!
Add to that OH which is £10m EBITDA so lowly assume 10x
That’s the remaining businesses worth £300m
It's a good deal for those 'lucky' individuals that bought in yesterday, triggering a 16% rise. Blocks of 10k shares being bought all day - thought of buying in but didn't pull the trigger.
I think the market reaction can be explained by looking at the last segmental breakdown in the half year results;
TIC contributed £13.5m of the £33m adjusted operating profit for H124 and had £5.8m in dep'n and amort. So just £7.7m of operating profit. GRC was £22.9m adjusted operating profit, £19m operating profit after dep'n & amort.
So GRC has been sold for just 11x operating profit and 9x adjusted operating profit.
They've chucked in what appears to be a customised metric "16.2x proforma adjusted cash EBITDA" to make it look good value, I've never heard of anyone using adjusted cash EBITDA...
So if GRC has gone for 11x operating profit and TIC had £7.8m operating profit in H1, I think the max anyone could value TIC at is £170m. If we value it at 9x H1 adjusted operating profit of £13.5m then we get £243m. However, both valuations ignore £6.8m of head office costs...
Bottom line, post the £150m shareholder return I don't see how a business with ~£9m of operating profit can be valued at much more than £200m?
The disposal lowers the revenue by 20% but profit lowered by 40%..The shareholder returns are around 105p per share,but l predict the SP will go lower than that post cash return.due to lower profits and cash return..Not 100% sure this is a good deal..
What’s fair value on market cap (SP x shares in issues) do people think and why 😀
I think it’s better than that. It leaves with TICC (£35m - £40m EBITDA). Let’s say this is worth £300m to a French PE
We are also left with the OH business which is £10m - £15m EBITDA and should be worth a 10x multiple
So your share price today could be £405m plus £300m plus £100m so £805m!
Tbh this is still short of the £10 a share all time high but the world is a different place now
I do think the French deal is real as I don’t see why they would return all the surplus cash. Surely you’d say and we are keeping £50m/ war chest for M&A
Well I wasn't expecting that. Seems Betaville were right on the rumour but wrong on the detail.
Currently MRL is valued at around £600m (market cap + Debt). So to get 400m for one division seems a great deal.
Leaves us with the TIC business + 200m cash.
How much this is worth is anyone's guess. Presumably they couldn't sell this for the rumoured 600m, but if its worth 400m that could give us a substantial rise today. Looks a decent deal.